TAXATION:

The Federal income tax has been around since it was made a permanent part of our lives when the 16^th Amendment was passed in 1913.  This was added to state income taxes, excise taxes, sales taxes, property taxes, poll taxes, and a host of tariffs which were in effect long before 1913. The first federal income taxes were flat taxes; i.e. 3 % on all incomes above $ 800.00.  Back then it was deemed to be the fairest method of taxation.

Over the past century, taxation has become so complicated, so complex, an entire industry comprised of tax attorneys and accountants was required to sort it out. The flat tax was replaced with a progressive tax system which has been modified dozens of times in a seemingly endless struggle to make it fair for everyone.  As a result of all of this tax legislation our current system isn’t fair to anyone.

Tax reform has now been passed by Congress for yet another attempt at simplifying  the tax structure and striving for fairness, but, all that happened was that we replaced the current seven brackets; 10 %, 15 %, 25 %, 28 %, 33 %, 35 % and 39.6%, with seven new brackets; 10%, 12%, 22%,24%, 32%, 35% and 37 %.  So, basically, it is still a system where the higher your income the higher your taxes. And that is just for individuals.  It gets even more complex when you add capital gains and business taxes.  There are several reductions which affect large corporations and small businesses, supposedly to stimulate the economy by encouraging more hiring and investment in plant and equipment to increase manufacturing capacity.  While it may be that some businesses were holding off on making these moves until after the tax reform shakeout, but the fact is that hiring and investing is driven by supply and demand and not substantially by tax breaks.  Sorry, that is just an economic fact. 

Interestingly, 44.4 % of all taxpaying units in the U.S. pay no income tax at all (2018).  This leaves the tax burden on the other half of society to support federal government provided services for everyone.  Liberals tend to support the mantra that says we need a tax system that forces “the rich” to pay their “fair share”.  The definition of “the rich” varies but the percentages most often heard range from the top 5 % to the top 1 % of all income earners. “Millionaires and billionaires” was the phrase bandied about by liberals during the elections.  If you actually do the math, you will discover that 20% of taxpayers pay 87 % of all federal income taxes.  The top 1 % paid more individual income taxes (37.3 %) than the bottom 90 % of tax payers combined (30.5%). Seems to me that “the rich” are already paying more than their fair share.  Conservatives tend to believe that it would be fair if “the rich” were allowed to keep more of what they earn and spread the burden to more people equally.

In my opinion, this debate between the “haves” and the “have nots” will never be reconciled but returning to a flat tax, which uses a fixed percentage applied to all incomes, would be the fairest approach.  The percentage should be calculated based on a rational federal budget and with an eye toward paying off the federal deficit within a reasonable period of time.  This percentage should be applied to all income with no caps and no deductions.  The percentage should change annually based on the need for balancing the budget and reducing the deficit.  In a society that appears to be moving more and more toward a socialist structure whereby government is being charged with providing more and more services it cannot afford for the good of, supposedly, all the people, those people are going to have to pay a heavy tax burden or the entire system is doomed to collapse from the debt burden.  Look at Switzerland.  This country not only provides a national healthcare system and guaranteed retirement income, but a host of other services that support their citizens.  In June the Swiss voted on whether to give every Swiss adult a "basic income" that would "ensure a dignified existence and participation in the public life of the whole population".  The amount being proposed was equal to $ 2,800.00 per month subsidy…..for life!  Fortunately, the Swiss people realized the financial chaos this would have wreaked on their population and voted the measure down. Unfortunately, with the federal, state (cantonal) and municipal taxes on all income, the Swiss still pay high property taxes, sales taxes, a value-added tax (VAT), border tax, capital tax, and on and on.  The average Swiss citizen pays about 60 % of their income in taxes. 

And the USA is headed in the same direction if we keep adding services and continue to deficit spend.  Most of the Democrats running for their party’s nomination for President support the Green New Deal.  The American Action Forum estimates that, between 2020 and 2029, the energy and environmental components of the Green New Deal would cost $8.3 trillion to $12.3 trillion, or $52,000 to $72,000 per household.  In my last post you saw that I acknowledge we need to find a solution to Global Warming.  This is not it. Many Democratic candidates also support universal healthcare accomplished by expanding the current Medicare system to cover every person currently residing in America.  According to a Washington Post article researching this subject, from 2019 to 2028, the federal government would spend an average of $ 2.8 trillion more per year on health care if Bernie Sanders’s plan were fully in place.

According to a study, published by the Mercatus Center, a libertarian-leaning think tank, notes that this price tag could not be covered by doubling what the government currently takes in through individual and corporate taxes combined.  In a subsequent post you will discover that I am personally for healthcare for every American, but this is not the answer.  Add to these two entitlement programs a free college education for all and other programs being proposed and the crushing death blow of taxation would be complete.  We better get ready.

States should have the right to determine the methods of tax collection that support local government as the residents of that state dictate.  This currently takes the form of state income tax, property tax and sales taxes.  Some states have one or more of these methods of raising income for state funded services.  If you don’t like paying state income tax, move to a state that doesn’t have that tax.  I know this is easier said than done, but is probably more practical than lobbying state representatives to eliminate a state income tax that is already in place.  Politicians don’t like to lower taxes and “rob” constituents of the services they lobbied for them to receive, even if it means they pile up debt.  Property taxes and sales taxes are progressive by nature.  The more you spend on housing, the more you spend on goods and services, the more tax you pay.  But these progressive taxes are fair because they don’t tax income but consumption, which an individual can control to a certain extent.  

I welcome your comments, as usual, and your ideas on better methods of, read that fairer, taxation.

THOUGHTS ON GLOBAL WARMING:

There are literally hundreds of issues that affect our environment of which global warming is just one. The effect of non-biodegradable solid and toxic waste and other pollutants in our streams, rivers, lakes, aquafers, reservoirs and oceans is one of them. It is placing not only our potable water supply but our food supply at serious risk.  The problem has so many lethal components as to be nearly impossible to cover in anything less than multiple books and will require a significant investment to bring about even the most remedial solution. 

Air pollution is another lengthy topic deserving of all the attention it is getting by the global community.  We have been to Beijing, Mumbai, Ho Chi Min City, Rome and other major metropolitan areas where the population is so dense and use of motorized vehicles is so prevalent that pollution is literally choking the life out of the inhabitants.   I have also grown up in the suburbs of NYC and Los Angeles at a time when it looked like air pollution would win the battle.  I remember looking up from the football practice field at about 3:00PM and watching the smog roll in over the San Dimas hills into the Pomona Valley. By 4:00PM we were all wheezing and coughing and our lungs ached.  On an average summer’s day you could not even see the San Gabriel Mountains, the 5,000 foot peaks of which were less than ten miles away. People rebelled, the Sierra Club stepped up their efforts, and environmentalists sprang into action. Finally, their elected leaders did something about it.  Reasonable local, state and federal legislation and regulations were implemented over the past thirty-plus years to reverse the trends and make substantial improvement.  In that time, NO2 is down -33% and fine particulate counts have been reduced by -47%.  Both of these and ozone are all below the federal standard 
for parts per .million (PPM) most days of the year.  This shows that the deleterious effects of unchecked burning of fossil fuels can be minimized, if not reversed.  But what about global warming.

For years the most learned scientists in the field have debated whether global warming was real or imagined.  Depending on who was funding their research, the opinions ranged from potential global disaster of epic proportions to complete and utter hog wash and everything in between.  Now it seems that science has settled on some point that leans toward the former and those countries with the worst pollution problems are jumping on the pending global disaster bandwagon. 

The questions that seem to still be unanswered are, first, how long it will take for global warming to have the disastrous effects that scientists predict will eventually occur and, second, can those impacts be reversed in time.  From what I have read, and being the positive minded person I am, I believe that we can make a difference.  But, it will take a massive collaborative effort and the cost will be astronomical.  Then the questions become can we get the industrialized nations of the world to cooperate enough to come up with a comprehensive plan for change and can we, collectively, afford it. Those are questions that our national leadership must address, but for the United States I believe that it will require all Americans to be willing to change and sacrifice will be required. That sacrifice means accepting responsibility for our own carbon footprint and changing our lifestyles and habits forged over a lifetime.  This is easier said than done, of course.

We need a commitment to clean, alternative energy sources and expand those sources more rapidly than we have in the past.  Solar power, wind power, geo-thermal power and alternatives to carbon-based fuels have been around for decades, and yet these renewable energy sources represent only 12.2 % of total primary energy consumption. 

I believe private industry needs to be incentivized to invest in renewable energy.  Be that tax credits, low interest loans, or other subsidies until decent returns on investment can be obtained. Yes, profit needs to be part of the incentive for change. Higher taxes on fossil fuels are inevitable if people are going to be convinced to move to clean energy.  Development and production of hydrogen fueled cars must be encouraged and the American automobile industry must be mandated to convert from traditional fossil fuel engine production to electric and hydrogen vehicles within a reasonable period of time.  Now I am sure that some will say, hey, Jud, you are advocating for government interference with the free enterprise system and we thought you were against that.  You would be correct on both counts, but it is the only way to stimulate change fast enough to avoid the forecasted disaster.  Once manufacturers have converted and the market starts accepting these new technologies, government needs to step back out.

If you agree with my thoughts, write your congressional representative and let me know your thoughts. If you disagree, I would still like to know where you are coming from on this issue.  Our children and our grandchildren's lives depend on it.

Immigration Insight:

First of all, if you are the person who believes that a wall is the solution to immigration reform in this country, stop reading.  You will not like what I have to say here.  Immigration reform is badly needed in our country today.  We need it because of the very real threat of terrorism that plagues the world, not just our country, but also because we are talking about people and their well-being and safety, both citizen and immigrant alike.  We are talking about ensuring that one of the cornerstones of our society remains intact.  It recognizes that America was founded, built and became a successful and productive nation through the efforts, labor, investment, and initiative of immigrants, many of whom gave their lives to build it, protect it and defend it. 

A key element of immigration reform must involve border security.  While I realize that there are areas of our southern borders where barriers to entry are needed to control flow and assure adequate security, the “big, beautiful wall” that the President campaigned on and is proposing in his Executive Order isn’t that barrier and won’t work to reduce the flow of illegal immigration.  We must invest in not only more and better trained human border control agents, but also, and most likely more importantly, we must invest in modern electronic surveillance equipment.  These should include satellite and drone surveillance, infra-red and remote controlled cameras, motion and sound sensing devices, and tremor sensing devices (to detect subversive tunneling efforts).  We need to invest more in our Coast Guard, port security personnel, including advanced canine units, and better electronic surveillance.

To stem the flow of illegal immigrants into our country, our nation needs comprehensive legislation that recognizes the vital positive economic impact these illegal residents have contributed to communities for decades and acknowledges that as one of the wealthiest democracies and national leaders of democracy on the global stage, we have a responsibility to those outside our boarders suffering from poverty, violence and governments/international systems that enslave others.  Our immigration policies should be legislated by our Congressional leaders with this in mind to achieve an actionable and realistic approach to securing our borders, protecting our citizens and preserving the United States moral authority globally. We need to work quickly in a bipartisan fashion to enact legislation that will serve all of our country, legislation that must include, not a path to citizenship, but a path to legalization. 

Call it a “Red Card”, if you will, but we need a separate and distinct status for illegal immigrants already in this country, that allows them to come forward without the fear of deportation and prove their value to our society.  Have them be identified, fingerprinted, their criminal record, if any, researched, pay a reasonable fine, go on a national registry with a special Social Security number, verify their employment and employment history, and local authorities made aware of their presence within the community.  Then, and only then, should they be given legal status.  A reasonable probation period, perhaps five years, would be given wherein the person would have to remain employed and not commit any crimes, even a misdemeanor.  They would receive access to medical care (which they have now), education for their children (which they have now) and other public services (many of which they already enjoy).  They would need to file annual Federal, State and Local income tax returns, as required by local law, pay into Social Security and Medicare and stay current on any property taxes for which they may be responsible.  They would neither be able to serve in the military nor would they be able to vote.  They would not be able to purchase, own or possess a firearm of any kind.  Violation of this clause would mean immediate deportation.  Their driver’s license would have special identification alerting authorities to their status, not for targeting or suppressive interrogation, but to help prevent it.  Any immigrant in this program who commits and is convicted of a felony or serious state crime would result in immediate incarceration until the sentence is served completely and then that individual, and the immediate family, be deported. 

The idea of crafting a strong comprehensive immigration policy is apparently being dismissed by the current presidential administration.  Instead, immigration policy is being subjected to the whim of the Presidents already extensive use of executive privilege.  The following is something which influenced my opinion about immigration along with the experiences I had with unknowingly employing illegal immigrants in my own company.  I quote the social statement contained in the Evangelical Lutheran Church of America policy addressing immigration, adopted in 1993:   "When we rebuild walls of hostility and live behind them - blaming others for the problem and looking to them for solutions - we ignore the role we ourselves play in the problem and also in the solution.  When we confront racism and move toward fairness and justice in society, all of us benefit"

This will be an expensive national effort, but it is one of the few VITAL roles that the federal government is charged with in the Constitution and one with which private enterprise can assist but cannot coordinate.

Let me hear from you if you have a comment.